Weighing the Options of Refinancing
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It has been said that only when your new interest is at least 2 points lower, should you refinance your loan. Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it may be a good time to look into it. A refinanced mortgage loan is often worth its cost several times over, because of the advantages that may come, in addition to a reduced interest rate.
Benefits from Refinancing
You could be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage. You may also have the option to "cash out" a portion of the built-up equity in your home, that you will be able use to consolidate debts, make home improvements, or finance a vacation. You could have the option to refinance into a shorter-term mortgage program, enabling you to build up your equity faster.
The Cost
Of course, you will have some fees and expenses during the the refinance process. With your refinance, you're paying for basically the same things you paid for during your original mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might offer to pay discount points (prepaid interest) to get a more favorable rate of interest. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the term of the new mortgage can be significant. Please consult with a tax professional before acting on rumors that these paid points can be deducted on your federal income taxes.
Speaking of taxes, once your interest rate is lowered, naturally you'll also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is another cost that some borrowers take into account. Call us at (207) 571-8034 to help you do the math.
Most people find that the savings each month balance out the initial expenses of a refinance. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (207) 571-8034 to get you started.
Curious about refinancing your home? Give us a call: (207) 571-8034.